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Quarterly Earnings

Earnings Cavalcade

By Roger S. Conrad, on Nov. 12, 2014

BHP Billiton (ASX: BHP, NYSE: BHP)

BHP Price Graph

Like all Australian companies, BHP Billiton releases earnings twice annually. However, owing to its large international investor base, the global mining giant also issues a quarterly operational update.

BHP Billiton’s copper production shrank 3 percent from year-ago levels and 17 percent sequentially, reflecting a decline in ore grades and a power outage at its mining operation in northern Chile.

The company’s alumina output fell 1 percent year over year, while nickel production tumbled 12 percent and aluminum volumes dropped 16 percent.

But the company made up for shrinking production of these base metals by growing its metallurgical coal output by 25 percent and its volumes of oil and natural gas liquids (NGL) by 49 percent.

All told, BHP Billiton grew its total commodities output by 9 percent, keeping the company on track to increase its volumes by 16 percent through 2015.

Price realizations for key commodities have dropped significantly; the price of iron ore, for example, has plummeted by 39 percent this year because of growing supplies and slowing demand growth in China.

Falling prices have forced BHP Billiton to deliver meaningful cost reductions. Meanwhile, the spin-off of some noncore mining assets should also help the company to focus on its best properties.

BHP Billiton’s stock has pulled back significantly since summer, reflecting ongoing weakness in the glutted iron ore market.

On the plus side, the company continues to invest in low-cost productive capacity, a luxury that smaller rivals’ can’t afford. These moves mean that BHP Billiton will be even more powerful during the next upturn.

In the meantime, the company continues to grow its payout by about 5 percent annually.

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